G8 Focus on Taxes, Transparency, and Trade

It is such a great time in many African countries economically. After the Asian miracle, we have an Africa which is growing fast than other regions of the world. A great time indeed.

But this growth has many many obstacles which make some gains in GDP growth mere academic exercise for a lot of countries - Zambia included. Why? Well to start off, we have an economy propelled by the mines whose contribution to the economy is actually not that great. We have read about the way our multi-nationals have taken almost everything out through tax avoidance or worst case tax evasion. If there was a good contribution from most of these multi-nationals, our tax contribution as citizens through (Pay As You Earn) PAYE would be reduced. But alas, even Switzerland gets a bigger chunk of 'our' money than we do!

Why is the state of affairs like that? Well, partly because I believe the West benefited from this arrangement! Do you think Switzerland would not enjoy stolen money presented to them as taxes? Honestly? They have built an economy out of the proceedings of crimes (as my Zambian law would put it). Think about it, they have built a system of secrecy on all banks and they are proud of it and say, you want to sort it out, deal with your issues in your country. The West enjoyed this and it was business as usual. 

But as you know, there is a little thing I learnt from Martin Luther King's statements and now quotations. I have kept this in my head at all times and has really guided me to make some decisions since I was in grade nine.

"Injustice anywhere is a threat to justice everywhere" - Martin Luther King Jr.

There was an injustice on many resource rich countries and the beneficiaries just turned a blind eye to the happenings. But the threat has now caught up with them! Tax avoidance has now not only hit the resource rich third world countries, it has hit the "first world". It has hit them so badly that the G8 meeting has put the three (3) Ts on the agenda.

But as life would have it, the G8 is a group of 8 from the world's eleven (11) wealthiest countries. The three (3) missing countries include China, Brazil and India. 

The good news, the west and us are being attacked perhaps by the same enemy! So we now have an opportunity to make things right and just. ?The demand from the resource rich nations has just been one - access to information. The g8 meeting is also working on making access to information a priority and an agreement should be worked on those lines. So maybe because we speak the same language on this issue, we can now move together and make progress? I seriously doubt it! The west still enjoys and would like to enjoy the fruits of crime in African countries. I will be shocked if they prove me wrong by actually working for the better standing of all countries facing this enemy. My belief is that they would come up with agreements that will suit themselves and leave the third world on their own path to freedom. Maybe under the G11 would we expect something seriously correct - maybe!

I have great respect for Cameron for making this topic priority. He has done a lot by just putting it as an agenda item. I wish more could be said on this issue. And I believe his statement "Making sure we have more trade deals so we keep prices down, making sure we have greater transparency so we can help developing countries get the tax and revenue that they need, and this issue of taxation, making sure we crack down on tax evasion and aggressive tax avoidance, so right across the world, countries get the tax revenue they need to keep taxes down for hard-working people." as quoted here, is a good one, but I think the motivation is wrong. It should have been done on its own merit when the issue started coming out! Not when they have been hit by the same "crime". If they had not been hit, they would have gone on with business as usual. That is exactly what is wrong with the economy structure at the moment. Things only change when the powers that be are in the firing line. We need to strike a balance and act when something wrong has been sighted.

Lets pray and hope the G8 makes a good outing of these issues as they can make things better for the world. We have to work to improve the taxation and justice in revenue collecting. I always say, there is a time that the west will need justice in such matters when the developing countries actually develop. It looked like a joke, but today, even the G8 countries are not among the 8 wealthiest nations. There is a group of "emerging economies" that have emerged and got into the top 8! Imagine 40 years from today who will be among the top 8 wealthiest countries.

Fight Tax Evasion/Avoidance ... Don't Give Aid

A lot of African people have stood up and said no to Aid. For obvious reasons, Aid has been around for decades with little to no hope of seeing Africa move a step closer to development and provide for its people. 

In extreme cases, people have even claimed a reduction in living standards as statistics show that African people have become poorer in the time of Aid. From 11% poor to 66% is a scary statistic. 

"Despite a deluge of Aid between the years of 1970 and 1998, poverty on the continent skyrocketed from 11 percent of the population to 66 percent, which means over six hundred million Africans are now impoverished." (Guernica)

This is under the claim that over 1 trillion dollars have been sent. A figure nicely fought by pro-aid people like Owen Barder that the figure is less than trillions of dollars! "since aid began in the 1960s donors have given a grand total of $502 billion to sub-Saharan Africa, which is worth about $866 billion in today’s prices. (Table 29; excludes debt relief.)". But is it really trillion dollars or no does not bother me. The fact that it has not worked will not make a point for it because the figure is $200billion less to be regarded as a failure! Will it make the point more true if they said 'despite the 500billion to 800billion of aid, there is nothing to show that aid is helping Africa (oh sub-Sahara Africa?' I think the substance that aid has failed to improve the lives of the continent is priority in considering this issue even if you disagree on the figures. I think the case that this policy should be re-looked at is a good one and one that should be taken on for people truely interested in seeing the growth of Africa and an improvement of people's life. Surely, there is no transparency on aid (even recognized by the OECD - "The current lack of transparency and predictability of aid have been recognized as key bottlenecks in making aid more effective."), will a $200billion not be spent through back door "help"? If you really want the $1 trillion to show up somewhere before you indicate that aid has failed.

My alternative to aid has been fairness in trade and the West not stealing the resources from Africa. After all, it is common knowledge that the West benefits more from Africa and only send Aid as a personal action to sleep at night. 

By calculations that need not be very complicated and require a lot of resources, just qwids (1) I have created a graph of aid inflows into Africa from 1960 to 2012.

Now we see how much aid has been increasingly off-loaded into Africa and one would expect a corresponding effect on eradicating poverty. The simple graphic data I could find is on a working paper by Dr. Mark Perry (University of Michigan) from this post.

Not much improvement from the '70s to warranty a fight to maintain the status quo. Obvisoiusly, updated data is needed and I am working on it.

On the other hand, data from different sources shows the same dismal result - aid is not helping at all. "Helping Africa is a noble cause, but the campaign has become a theater of the absurd – the blind leading the clueless. The record of Western aid to Africa is one of abysmal failure. More than $500 billion in foreign aid – the equivalent of four Marshall Aid Plans – was pumped into Africa between 1960 and 1997. Instead of increasing development, aid has created dependence.....
The more aid poured into Africa, the lower its standard of living. Per capita GDP of Africans living south of the Sahara declined at an average annual rate of 0.59 percent between 1975 and 2000. Over that period, per capita GDP adjusted for purchasing power parity declined from $1,770 in constant 1995 international dollars to $1,479. The evidence that foreign aid underwrites misguided policies and feeds corrupt and bloated state bureaucracies is overwhelming."(CATO Institute). I think Andrew Mwenda and Dambisa Moyo are on to something that can clearly be seen although fought by the likes of Bono and Bill Gates. Aid is not doing Africa any good.

Tax Problems

I believe this is an area where Bill Gates and the team can help Africa and not handouts! There is a lot of out flows in revenues from Africa which can have far better impact on development prospects and eradicating poverty than aid. I would have loved to show how good Bill Gates' company was doing on that front, but this is not helping. I wouldn't want to think of the effect on Africa itself.

So if Africa and the West got together and fought this battle and seriously on disclosure, more results would come out than what Aid has done so far. Maybe as a result of recent fights by the West, Africa may actually benefit! 

"Rich countries have promised much but delivered little meaningful support to African countries on tax evasion, said a report ahead of a G8 meeting chaired by David Cameron.

The UK prime minister has made tax and transparency key subjects for next month's summit at Lough Erne, Northern Ireland, but this year's Africa Progress Panel report, Equity in Extractives, criticises the rich countries in the Organisation for Economic Co-operation and Development (OECD) for their failure to strengthen disclosure standards.

Africa loses twice as much in illicit financial outflows as it receives in international aid, the panel said. It is unconscionable that some companies, often supported by dishonest officials, use unethical tax avoidance, transfer pricing and anonymous company ownership to maximise profits, while millions of Africans go without adequate nutrition, health and education, the panel added."(Guardian)

I have said it before on this blog, no help is coming out of the West on this issue. It has more contribution than Aid will ever have. Most importantly, it would kill the dependence that Aid has created.

Edited:
You may wish to read the latest developments on this topic here (Give us access to information on tax havens and tax avoiders, African leaders tell David Cameron ahead of G8 Summit.)